Stocks are dropping sharply after President Trump threatened more tariffs against China. The escalation of tensions came as investors were hoping the long-running trade war between the world's two biggest economic powers might be winding down. (May 6)
AP, AP

WASHINGTON – President Donald Trump said Friday that trade talks will continue between the United States and China, even as new tariffs took effect and the president threatened the Chinese with even more in the future.

"Talks with China continue in a very congenial manner - there is absolutely no need to rush," Trump said in an early morning series of tweets sent just hours after new tariffs took effect.

Trump also said "the process has begun" to increase tariffs on another $325 billion in Chinese goods, but did not specify when that might happen or how that plan might be affected by the ongoing trade negotiations.

While Trump claimed that "tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind," markets analysts noted that China will retaliate by increasing tariffs on U.S. goods.

The results, they said, will be higher prices for consumers, perhaps less trade between the world's two largest economies, and more complicated negotiations on a new trade agreement.

"The taxes are a transfer from Americans to Treasury - Chinese don't pay American taxes," said Riley Walters, a policy analyst for Asia's economy and technology with The Heritage Foundation.

Walters said he is awaiting a notice from the U.S. Trade Representative's Office about the "next round" of tariffs, "when everything we buy from China could cost 25% more."

Trump posted then deleted his Friday morning tweet thread on the China talks. He later re-posted the thread, adding comments claiming that tariffs are a good policy and criticizing Democrats like presidential candidate Joe Biden who have criticized him over his trade tactics.

Talks with China continue in a very congenial manner - there is absolutely no need to rush - as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S....

New U.S. tariffs on $200 billion in Chinese goods went into effect at 12:01 a.m. on Friday, after the two sides were unable to nail down the details of a new trade agreement during talks on Thursday.

U.S. and Chinese negotiators failed to reach an agreement late Thursday ahead of the president's self-imposed midnight deadline, meaning tariffs jumped to 25% from 10% on a massive range of Chinese goods, including office furniture, handbags and frozen catfish fillets.

China’s Commerce Ministry said it would take “necessary countermeasures” but did not give any details.

The White House left open the possibility of coming to an agreement to roll back what would amount to the largest escalation to date in a months-long trade war with Beijing.

The White House said that Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer “agreed to continue discussions tomorrow morning” with the Chinese delegation.

Trump’s mixed messages in the run-up to the midnight deadline roiled markets as investors tried to parse the president’s words and assess whether he was serious about raising the tariffs.

Trump announced Sunday on Twitter that he intended to increase tariffs on $200 billion in Chinese goods and impose new levies on another $350 billion in imports because he was angry about the pace of the talks and at what he said was China’s attempts at backtracking on several commitments it had made during months of negotiations.

The announcement came after Trump and his top economic advisers had said for weeks that talks with China were progressing and that a deal was imminent. As late as Thursday afternoon – hours before Chinese Vice Premier Liu He met with his counterparts in Washington – Trump signaled that a deal with Beijing remained within reach.

Speaking to reporters at the White House midday Thursday, Trump indicated he was ready to move forward with the new tariffs. But he also said he had received a "beautiful letter" from Chinese President Xi Jinping and would likely speak to him about the negotiations.

“We were getting very close to a deal and then they started renegotiating the deal," Trump said. "He just wrote me a beautiful letter. I just received it."

Global markets dropped in the wake of Trump's threat, as investors feared new U.S. tariffs and Chinese retaliatory tariffs will raise prices for consumers and slow the global economy. The Dow Jones Industrial Average swung throughout the day and closed down 139 points after tumbling more than 400 points earlier in the day.

Trump, who ran for president in part on a promise to renegotiate U.S. trade agreements, has made threats to raise the Chinese tariffs to 25% twice before, and then blinked at the last minute. Trump cited "substantial progress" in late February when he pushed back a March 1 deadline to reach an agreement or impose higher duties.

Workers sorting dried seafood for export at a factory in Lianyungang in China's eastern Jiangsu province. China said on July 6 it was "forced to take necessary countermeasures," after Washington launched what Beijing called "the largest trade war in economic history," imposing tariffs on billions of dollars in Chinese imports. AFP/Getty Images